This is a blog about the use of emerging technologies to boost the governance of public procurement. It used to be a blog on EU law, with a focus on free movement, public procurement and competition law issues (thus the long archive of entries about those topics). I use it to publish my thoughts and to test some ideas. All comments are personal and in no way bind any of the institutions to which I am affiliated and, particularly, the University of Bristol Law School. I hope to spur discussion and look forward to your feedback and participation.

In its Judgment in Quimitécnica.com and de Mello v Commission, T-564/10, EU:T:2014:583, the General Court has addressed a rather strange issue concerning the interest rates applicable by the European Commission when undertakings that have breached competition law choose to (partially) defer the payment of their fines.

The main dispute derives from the fact that, under the 2002 Financial Regulation, unsecured outstanding amounts are subject to an interest rate of ECB+3.5%, whereas secured debts go down to ECB+1.5%. It is a rather important point to note that the Financial Regulation indicates that the deferral of payments is subject to the condition that "the debtor lodges a financial guarantee covering the debt outstanding in both the principal sum and the interest, which is accepted by the institution's accounting officer" (emphasis added).

In the case at hand, Quimitecnica and JMS requested their fine to be payable in three annual instalments and offered to provide a bank guarantee by a given Portuguese bank. The Commission's accounting officer agreed to the deferred payment plan, subject to them providing a guarantee issued "by a bank rated as long-term AA", which the proposed guarantor was not.

The undertakings failed to obtain such guarantee and challenged the "long-term AA" requirement before the GC (in the case that has now been decided). They did not provide any other bank guarantee. However, during the procedure, the undertakings met all deadlines in the agreed (but unsecured) financial plan and eventually settled all their debt with the Commission. However, at this stage, the Commission requested the payment of additional interest in view of their failure to provide satisfactory guarantees for the credit (now effectively extinct).

There are may interesting passages in the Judgment, such as the attitude displayed by the Commission in its argument that the appeal had now become void of content (due to the debt having been paid in full) despite the dispute of over 36,000 Euro in interest being on the table. The arguments against the standing of the undertakings to challenge the measure on the basis that it could not change their legal situation simply do not hold water, regardless of the technicalities in which the Commission and the GC engage.

More importantly, the way in which the GC accepts the position of the Commission and does not engage in any significant assessment of the proportionality of the "long-term AA" rating is troubling. Indeed, the arguments raised by the undertakings on the inconsistency incurred by the Commission should have been given more weight. It is definitely irrational for the Commission to be criticising rating agencies and proposing their regulation, while at the same time stubbornly relying on their ratings and not being willing to negotiate the conditions of acceptability of guarantees issued by other banking institutions.

Furthermore, from a functional perspective, the case does not make much sense and there is an element of estoppel that I am finding difficult to pin down, but puzzles me. If the furniture of the bank guarantee was a condition for the acceptance of the payment plan, absent the guarantee, the Commission should have insisted on payment of the debt immediately and in full.

Reversely, by accepting partial payments according to the plan, and leaving its credit completely unsecured during the proceedings before the GC (could an interim measure not have been requested?), the behaviour of the European Commission could be seen as amounting to a waiver of the guarantee requirement. Somehow, I think that the Commission is having its cake and eating it too. And I am not sure that the same behaviour by a private creditor would be tolerable, which makes the findings of the GC all the more troubling.

In any case, it is very likely that the cost of this procedure far exceeds the 36,000 Euro at stake, which makes me wonder if this is the best possible use of the Commission's and the GC's resources.